Primary hosts Poland; oil prices dictate tone for EM; Lat-Am outperforms; Lebanon eyes bonds

By Christine Van Dusen

Atlanta, April 13 – Poland sold notes on Wednesday as oil prices at first reversed their rally, then stabilized, creating “the perfect mix for an absolute rip-fest in emerging markets credit,” a trader said.

Oil prices remain volatile, rebounding strongly on Tuesday, then moving downward on Wednesday morning before rebounding again. All of this movement shows how “fragile” prices are and how they so easily “move on headlines,” a strategist said. “With no doubt, the Doha talks this Sunday have become the key driver, as investors bet on the outcome.”

Of note on Wednesday morning was a report that Iran’s oil minister would send a representative instead of attending the oil producers’ meeting himself.

“Iran’s oil ministry, however, clarified that no decision has been made yet on whether he would attend,” the strategist said.

Also coloring the picture on Wednesday was Tuesday’s news that the International Monetary Fund had revised its global growth forecasts downward.

“Growth in emerging market and developing economies was cut by the same margin, to 4.1% and 4.6%, respectively,” he said. “But on the bright side, China’s growth projection was upgraded.”

Looking to Latin America, some profit-taking was seen on Wednesday but buying remained consistent, a New York-based trader said.

Brazil-based Vale SA was “moon-bound,” he said, “up another two to three points through the curve.”

Most other Brazilian corporates, he said, were gapping higher. Braskem SA was the exception, moving up only a little bit.

“[Gerdau SA] looks to be up another one to two points through that curve,” he said.

Some names quiet

But many credits from the region were quiet on Wednesday morning, the trader said.

“Mexican high-grade, which has been kind of stuck in neutral, has broken out again,” he said. “Not the banks, though. They are barely higher or even unchanged, but tighter. Remember Treasuries are 10 basis points higher, so overall they are still performing.”

Sovereign spreads rip tighter

Late in the day, sovereign credit spreads for Latin American names moved “relentlessly tighter and higher on the day,” another New York trader said. “We came in and looked to be in yesterday’s context, but credit took off, with the equity market rally early on.”

Brazil’s five-year credit default swaps spreads finished the session at 340 bps from 355 bps, while Mexico’s moved to 158 bps from 162 bps.

All of this came against the backdrop of continuing political turmoil in Brazil as President Dilma Rousseff – who faces impeachment proceedings – accused her vice president of trying to stage a coup, Schildershoven Finance BV said in a report.

“The probability of impeachment continues to grow,” the report said. “The Congress is expected to start the impeachment voting on Friday. We don’t expect Rousseff’s comments to change the situation. The probability of her fall continues to increase.”

Venezuela, Argentina higher

Venezuela’s 2027s closed at 40.75 from 38.25, and PDVSA’s 2017s ended at 54.40 from 53.30.

Argentina’s Bonar 2024s finished at 110 from 109.25, he said.

“Flows were dominated by better buyers today from the early get-go,” he said.

Said another trader, “Cash prices jump on the day as the Street seemed to be scrambling to cover paper sold to clients.”

Fertilizer makers downgraded

In other news, Standard & Poor’s took negative ratings actions on four global fertilizer producers, including Ukraine’s Uralkali OJSC and EuroChem Group AG, according to a report from Schildershoven Finance BV.

“The rating actions reflect a significant deterioration of the fertilizer market environment over the past six months and S&P’s expectations that fertilizer prices will remain well below 2015 levels in the next several years,” the report said. “We do not expect the S&P decision on the Russian fertilizer producers’ ratings to affect the eurobonds in the near term, as the demand for risky assets remains high.”

However, the companies could see some “repricing of the issues if the agency’s forecast comes true,” the report said.

Alternatifbank notes perform

The new issue of $300 million 8¾% notes due 2026 that Turkey’s Alternatifbank AS priced this week at 99.01 to yield 9% “performed very well into the close and this morning,” a trader said.

The notes were initially talked at 10%, then revised to the area of 9% to 9¼%.

On Wednesday, the issue was spotted at 102 bid, 102½ offered.

BofA Merrill Lynch, Citigroup and Commerzbank were the bookrunners for the Regulation S deal.

Poland sells notes

Poland priced a €750 million tap of its 2 3/8% notes due Jan. 18, 2036 at mid-swaps plus 125 bps, according to an announcement from the sovereign.

The notes were initially talked at a spread in the 135-bps area.

HSBC, Citigroup, ING, Societe Generale and Unicredit were the bookrunners for the Regulation S deal.

The deal attracted an order book of €1.1 billion.

Lebanon mandates bookrunners

Lebanon has mandated Blom Bank, Byblos Bank and Deutsche Bank as bookrunners for an issue of $1 billion or more of eurobonds, a market source said.

The Regulation S deal is expected to price this month.

Afreximbank investor call

African Export-Import Bank (Afreximbank) will host an investor call on Thursday to update investors on the company’s financial performance, a market source said.

MUFG Securities is arranging the call.

Afreximbank is a Cairo-based international bank specializing in trade-related financing for Africa.

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